Coke to cut 6,000 jobs

Published: Thursday, January 27, 2000

ATLANTA {AP} Coca-Cola will shed more than a fifth of its work force, eliminating 6,000 jobs in a reorganization aimed at reducing the powers of its Atlanta headquarters and freeing managers around the world to make the best decisions on how to sell more soda.

The job cuts announced Wednesday the largest in the 113-year-history of the world's largest soft-drink maker will affect 2,500 positions at the company's Atlanta headquarters, 800 elsewhere in the United States and 2,700 outside the country.

"The world in which we operate has changed dramatically, and we must change to succeed," said Coke's new president, Doug Daft, who already has moved quickly to reshape the ranks of management before he assumes the job of chairman and chief executive in April.

"We must think local and act local, taking our business to where our business is. This will allow us to sell more products," he said.

The job cuts, which are expected to be completed in March, represent about 21 percent of the company's 29,000-person global work force and 40 percent of the 6,200 jobs in Atlanta.

Most of the cuts are in back-office functions, rather than in producing and marketing soft drinks.

For example, employee compensation and benefits work will be contracted out, as will plant and office maintenance.

The company is struggling to improve profits after enduring a string of setbacks during the last 18 months, including a severe economic downturn in Asian markets, a costly product recall in Europe and a discrimination lawsuit filed by a group of minority employees in Atlanta.

Coke estimated that the job cuts will save $300 million a year but said earnings would be reduced by $800 million before taxes this year to the cover costs of the realignment.

The announcement came as Coca-Cola separately reported fourth-quarter earnings that slightly exceeded Wall Street expectations. But Coke shares fell more than 4 percent in heavy trading on expectations that short-term profits would be squeezed as the company reduced shipments of soft-drink concentrate to bottlers to better manage inventories, said Caroline Levy, an analyst with Schroder and Co.

Coca-Cola had a loss of $45 million, or 2 cents a share, in the last three months of 1999, compared with a profit of $597 million, or 24 cents a share, in the same period a year earlier.

The fourth-quarter loss included 33 cents per share in one-time charges, including writeoffs in Russia and the Baltic states. Excluding the extraordinary factors, Coke earned 31 cents per share and that was a penny higher than the 30 cents a share that Wall Street expected.

For the year, Coke's earnings tumbled 31 percent to $2.43 billion, or 98 cents a share, from $3.53 billion, or $1.42 a share, in 1998. In addition to the writeoffs, the decline reflected the lost sales and cost of European recalls last year after a product contamination scare.

Revenue rose to $19.8 billion from $18.8 billion.

In an interview with The Associated Press, Daft conceded that the European recall showed that the company was not well-suited to react quickly and that local officials were not autonomous enough.

"It was a wake-up call for us," he said. "We looked at ourselves very closely as a result of it, and obviously have made some changes in the way we will do business. We will do business understanding the environment."

The size of the cuts surprised many analysts who had predicted Coke would trim 2,000 to 4,000 jobs. Daft said the 6,000 figure was chosen after a six-month review of the company's entire operation.

The job cuts are the latest in a series of management shuffles engineered by Daft, who became president Dec. 5 when Chairman and CEO M. Douglas Ivester stunned employees and analysts by announcing he would retire after Coke's annual shareholders' meeting in April.

Doug Lane, an analyst with Merrill Lynch, said Daft's shift of decision-making powers to local managers stemmed from the three decades he spent with Coke's Asian operations.

"You've really got to go with management on this one," Lane said. "It's obvious that he's very passionate about decentralizing responsibility. He is emphatic that this is a local business, that you have to mix the global brands with the local brands."